Legislative update: Financial Markets Amendment Act 2024
At the time of writing the “Wijzigingswet financiële markten 2024” (the “Amendment”) is pending consultation in the House of Representatives or “Tweede Kamer”.[1] The Amendment is part of an annual amendment cycle of laws and regulations in the area of financial markets (including the Financial Supervision Act and the Supervision of Trust Offices Act 2018 (the “Wtt”). This cycle adopts smaller legislative issues that do not justify a separate proposal for amendment. Since the Amendment is still pending, the timing of the Amendment and entry into force is unclear at this time.
In this news article, we will highlight the proposed changes, being:
(i) expansion of the sanctioning tools regarding crowdfunding service providers;
(ii) additional prudential obligations for insurers;
(iii) amendments to the Supervision of Trust Offices Act 2018 (Wtt 2018); and
(iv) changes in the moment of implementation of EU-directives.
After the completion of the proceedings in the House of Representatives, the Amendment will have to be approved by the Senate or “Eerste Kamer” before the proposal can be converted into law. We will keep you informed of the latest developments through news items on this site.
Expansion of the sanctioning tools regarding crowdfunding service providers
The Crowdfunding Regulation (the Regulation)[2] contains a number of specific competences that are not yet part of the existing instruments of the Dutch Authority for the Financial Markets (AFM) and the Dutch Central Bank (DNB).[3] With the proposed introduction of article 1:77m Dutch Financial Supervision Act (DFSA), the legislator intends to expand the sanctioning instruments so the AFM and DNB have the enforcement powers referred to in Section 30(2) of the Regulation. These enforcement powers include suspending and prohibiting crowdfunding offerings and/or the provision of crowdfunding services, as well as prohibiting publicity announcements of the crowdfunding service provider.
Additional prudential obligations for insurers
The Amendment currently contains two new prudential requirements for insurance companies registered in the Netherlands. The reason for this particular proposal is DNB’s letter of legislative desires from 2020 or “wetgevingsbrief”, in which DNB stated that it would like additional leeway ‘to counterbalance restructurings of insurance companies that may pose risks to its policyholders, such as entering into certain reinsurance structures or an initial public offering (IPO)’.[4]
The first proposed new requirement is to obtain approval, DNB must grant approval for amending or entering into an asset-intensive reinsurance contract which provides that assets can be transferred to a third country. DNB will only grant approval if the insurer’s application of the prudent-person rule is guaranteed in advance.[5] Under this rule, an insurance company may only invest in assets and instruments whose risks it can properly identify, measure and control, in such a way as to ensure the safety, quality and liquidity and the return of the portfolio in its entirety.
The second proposed requirement is that an insurer, before it can enter the regulated market through shares or other participation rights will need to obtain a ‘declaration of no objection’ by DNB. This will allow DNB, prior to entering the regulated market, to assess whether there is a controlled and sound business operations present during and after the IPO.[6]
Proposed amendments to the Supervision of Trust Offices Act 2018
The first proposed amendment of the Wtt 2018 relates to the definition ‘trust service’ and have it more clearly defined in order to prevent ambiguity and circumvention of the Wtt 2018. The proposed definition omits the wording ‘by order of’, so that under the definition it can no longer be understood that a contract of assignment is required to govern a legal entity. As a result, providing management services through an employment agreement will also fall under the definition of ‘trust service’.
Secondly and to the same effect as the first amendment, it is proposed to more clearly define the definition ‘domiciliation plus additional activities’ and align it with the definition of domiciliation in the Prevention of Money Laundering and Financing of Terrorism Act (“Wwft”).
The third proposed amendment of the Wtt 2018 concerns abolishing the requirement of approval for a modification of the formal or actual corporate structure of the group to which the trust office is part of. As turns out from supervision approval of such modification is not necessary as long as DNB is immediately informed regarding any change in the corporate structure of the trust office.[7]
The fourth amendment of the Wtt 2018 sees to the obligation for trust offices to include all obtained tax advice in the file of the client.[8] This proposed obligation should be seen as a supportive measure in regards to the prohibition for trust offices to provide both tax advice and trust services to the same client. This will make it easier for the supervisor to determine whether previous tax advice has been obtained and whether the independent client due diligence procedure has been conducted.[9]
Following from the first two proposals, DNB indicated in its 2024 letter of legislative desires[10] to modify the trust sector enforcement instruments. DNB is increasingly receiving signals that institutions are separating trust services with the goal of falling outside the scope of the Wtt 2018. Fragmented provision of trust services is prohibited (article 3(4) Wtt 2018) hence DNB requests that the fine on fragmented provision of trust services is increased from the second to the third category so that the fine is more effective and has a deterrent effect.
Entry into force of changes to EU directives.
The DFSA and its lower regulations have several dynamic references to European law. An example is the definition of ‘payment service’ as defined in art. 1:1 DFSA, which refers to an annex of the Payment Services Directive,[11] in which the various activities that are qualified as payment services are listed.[12] The moment this annex changes, the definition of ‘payment service’ within the DFSA will change accordingly. The Amendment envisages a new section 1:1a DFSA, which stipulates that such a change in the DFSA and its lower regulations will take effect on the day of the implementation deadline, unless otherwise stipulated by decree.
Would you like to know more?
If you would like to know more about the above amendment and/or any other financial supervision topic, don’t hesitate to reach out.
[1] https://www.eerstekamer.nl/wetsvoorstel/36442_wijzigingswet_financiele
[2] REGULATION (EU) 2020/1503 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 7 October 2020 on European crowdfunding service providers for business, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937
[3] AFM and DNB are the competent authorities under article 2(1) ae. Implementation Act EU-directives financial markets.
[4] Kamerstukken II 2019/20, 32545, nr. 117, blg-931909, p. 4
[5] Kamerstukken II 2023/24, 36442, nr. 3, p. 5.
[6] Kamerstukken II 2023/24, 36442, nr. 3, p. 6.
[7] Kamerstukken II 2023/24, 36442, nr. 3, p. 2.
[8] Articlel 39 Wtt 2018.
[9] Kamerstukken II 2023/24, 36442, nr. 3, p. 31.
[10] DNB legislative letter 2024.
[11] DIRECTIVE (EU) 2015/2366 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC
[12] Annex 1 Payment Services Directive
